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tv   [untitled]    June 6, 2012 11:30am-12:00pm PDT

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taxes are currently estimated in excess of $400 million to help reimburse the project costs. >>supervisor kim: i'm not sure f we're awfully embarrassing -- i thought we were reimbursed -- reimbursing roughly 50% of the cost because they actually go open space fees to the city for planning are regardless. i don't think there is a full reimbursement because then we would be reimbursing fees they actually owe the city. >> i think you are correct and i misspoke. it essentially redirecting that impact fees through tax anchorman's that doesn't come close to funding most of the public open space cost. but it is tool sources. >> when you came to this dollar
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amount, did you base set off other deals or contracts made with other developers? i want more clarification on how we came to that dollar amount. >> there are two primary factors. looking at the overall public open space cost of $28 million, this represents about 15% of the overall cost. we thought that was equitable and i think ultimately when we were negotiating this deal on behalf of this city, we were looking at the overall public benefits i discussed before. really looking at public benefits provided through this project and how to fund those
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from public moneys and private monies. we believe there is a way for the developer to up front certain costs and the partially reimbursed on the order of 15%. that seemed to be equitable based on the improvements made by the project and various tax flows coming from the project. these are meant to be one time costs and i have estimated there is additional taxes that will be generated from this project every year. the bulk of which is part and tax and the vehicle fees. >> if the cost of the open space public improvements go beyond what we are currently estimating, does that mean we would negotiate a higher reimbursement? >> the transaction documents obligate them to complete the
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improvements regardless of the cost. supervisor chu: you talked about the policies coming fall word -- that would go to the port commission first before coming back to approval. but we would still have to authorize the sale of a bond or issuance of debt and we would have to appropriate that through the board. >> that is correct. above and beyond the steps you just talked through regarding the formation of the district and approval of the financing plan, the board would need to approve any debt issuance as you do with all other cases. the board would still be required to appropriate the funds and you would do that
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whether it is the appropriation of pay as you go. >> much like we had, we would appropriate a certain level from the city? >> that is correct. that remains a discretionary act by the city. president chiu: 01 to follow up on a couple of points. part of what has been curious to many of us was the 50-50 split suggested by the port. i certainly appreciate the port has significant capital needs but i suggest every department in the city and frankly every district has significant capital needs. as our budget analysts point out, are capital planning committee had adopted guidelines that stated the port can obtain proceeds but if the project area included bonn court properties
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-- only the port properties should be retained to fund part capital projects. on this project, the court announced 27,960 square feet, 20% of this overall site. pat seems to be what the split ought to be. i think this is something we will have to think about. whether it is fixing capital projects or that great highway or other issues, we have to think about this issue carefully, whether simply because of the fact the port has support landed here, that makes sense and i don't think it necessarily does. a separate question is related to the fact the port is going to keep 100% of the transfer tax or
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to have -- i think it might be appropriate to think about that revenue as a potential source for the general fund. that might be an appropriate conversation to have. with regard to the $5 million -- that's a curious thing given the size of this project for the city to be paying the developer $5 million to build the open space we understood was going to be a benefit provided by the developer. we have received very few publicly available numbers on this project but as i stated a couple of weeks ago, the expected revenues are $470 million. the construction costs were $177 million. there is an enormous bill that and that difference between the figures, while there are some self costs in better than that, it has been puzzling to me why it is the port would agree to
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pay $5 million to the developer to provide a benefit we thought the developer was going to provide to the community. i know this will be raised by the budget analyst report, but i just wanted to state that. >> just to clarify. almost all the cost of the open space and streetscape improvements were addressed by impact fees which were approximately 50%. in that case, the developer affronted when had% of those costs and were reimbursed almost fully. they are paying 100% of the up- front cost and we have agreed to pay them a relatively small portion of that to the public fund.
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as for the overall benefit package and has a real -- as relates to the pavement, as you see in this discussion, there is not a lot of capital amounts of money -- it's mainly giving benefits to the city in smaller, ongoing payments or in terms of actual assets created. it seemed like an equitable solution when we were negotiating the package. equitable and with president to require the developer to pay 100% of the developer cost with all the liability in terms of cost overrun and offer a small partial repayments. based on the projects we just talked about, that is a pretty traditional model to include the
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tax income and reimbursement as part of the overall negotiation and we feel this is a significantly smaller repayment and some of those other cases. >> so when there are cost overruns in the other projects, who is on the hook for that? is it that developer or what ever we are able to generate? >> my understanding is an overall pledge with certain set asides and those tax anchorman's would follow to the developer until such time as they are reimbursed. it's not that we have to pay any other monies in those deals, but they could get up to 100% obligated. that's not at all the case in
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this project. frankly, they're being paid without interest. regardless of the timing of when the dollars flow back to the developers. as to be exact mechanisms, i have to confess i am not an expert in the way it flows. that being said, that is the bulk of my presentation. i wanted to summarize the public benefits not in numbers, which i have probably done too much, but to summarize the other benefits of the project, specifically the creation of open space. the new park between pacific and waterway -- broadway on the waterfront.
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there are other benefits to the city which are important. the transit rich housing units, to under 50 construction jobs. streetscape improvements along the embarcadero and washington, removal of for embarcadero curb cuts and relocation of service parking underground, new public parks,, public open space, a new pedestrian connections, and a rebuilt aquatic club. numbers are one way of saying it, but it's important to get a vision of how this would change with these new assets. president chiu: when did the rf p to allow for this project?
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>> 2008. president chiu: are you familiar with the government to address as a fait city government is contracting with a party, that party should not have had an influential role in influencing the rp that goes out for it. i have not gone over this but this copies of correspondence before the rfp that went out which indicates the developer may have played a key role in drafting this. >> i am familiar with the process and there were unusual circumstances in this case where the developer had already approached the port in 2006 and 2007 about combining the property. we told them we could not do this directly.
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at which time, to create -- we went back to our advisory group and we created a subcommittee to come up with policies and procedures based on independent community-based goals for the project. we proceeded on an rfp process outside of the developer. president chiu: i'm not sure if you were involved in the communications here, but from what i have been able to tell, it covers parking studies, easements and rights of ways, construction cost estimates, the types of information that would be relevant for an rfp.
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we have been advised in the past of the city attorney's offices of instances where contracts are entered into, but because of the undue influence, contracts have been declared void. i don't think it's necessary for us to get into. but from my perspective, what i learned this, it was troubling. >> that concludes my presentation and taught me and ports that are available for any further questions. supervisor chu: thank you. if there are no further questions, i would like to proceed to the budget analyst report. >> good morning.
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what is before you today in terms of decisions are the purchase and sale agreement of the sea wall lot three under 51, the trust's exchange that would remain seawall lot 351, a 66- year lease for the public open space between the developer and the port and a maintenance agreement between the port and developer which the developer would commit to maintaining the open space improvement. also before you is the intent to form an ifd, a project area that was formally approved and discussed here. the actual funding and how the money in -- how the money would accrue to the general fund is not before you. that is a board of supervisors' decision. the other point was brought
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which is this just involves public property, but there is an intent for the poor to come back and include the private portion at some future date. we have very different testament on the fiscal benefit to the city from the port says. our numbers are much more conservative. we give the number of $63 million. there are some areas of agreement -- president chiu: $63 million compared to the $144 million which the developer says is the net present value? >> that's correct. the differences are we included numbers we felt were validated that represented to us at that time the report went out. we did not actually consider them to be a public benefit in the same way included in the port estimate.
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there is one no. i think we what add to today's discussion and that is the transfer taxes at time of the sale. that's not something that was included in our report. they give an estimate of $4 million. we do not have the documentation on that estimate that there will be transfer taxes we did not include in our report. another number that is different is the $3.6 million for the maintenance of the park which we addressed in our report but do not have a number. my understanding is that would actually be funded by the condominium owners through the community facilities district. our recommendation, unless you ought to go into more detail on our estimates, the recommendations are -- president chiu: $63 million out of $144 million, that's about
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45% of the benefits we were told the port we were getting. those are the only benefits you've been able to document at this point. >> the differences in the numbers, if you want to go through that, they include transfer taxes, which we did not. they include permitting koses -- permitting costs which we did not include because this the costs can be subtracted from that. in terms of the revenue that would be generated, we use a different calculation and a different time to calculate those revenues. on port payments of 14 $20 million, we agreed to those numbers but subtract out lost revenues from future parking that would have accrued. the $12 million -- there are a couple of differences there. we are working off the appraised
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value and in our discussions this morning, there is a small strip of land that was not included in the appraisal. we have no way to verify the value of that land. there is not an appraisal on that. the other piece of the $12 million is there is an exchange going on. there is city property developer would be receiving, $12 million is not a net value. the cost of improvements to park lands, they say $12.7 million. we had understood it was $8 million. it has been an increase in that sense the time we submitted a report, but we don't have any specific validation on that number coming from the developer. we don't have any other documentation on it. we don't necessarily agree that there should be a parking subsidy. we have not seen those numbers. my understanding is they're coming from the developer. this is the first we have heard
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of it but we don't think that would be a subsidy or benefit to the city. president chiu: in other works, the fact the developers spending money to build a parking lot that is larger than many of us would want and is claiming somehow that's a value to the city if he is not being reimbursed to that, you are saying that should not be included as part of the benefits because we have not done it that way in the past? >> we don't have any documentation of the costs are, what the revenues would be or that or be a difference. finally, we simply don't believe a private club would be included as a public benefit. those are the major areas of differences in our numbers. recommendations on page 8. we have two recommendations to amend the proposed ordinance. one is under the agreement, the developer would developed a restaurant cafe, retail building
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on the public open space, and enter into a ground lease with the port and the port would receive 15% of the income from that property, but there is no minimum annual guarantee. we recommended amending the resolution to go back and negotiate a minimum annual guaranteed. this would be standard in port lease. as the agreement now stands, the port says the developer would pay the port 100 to $7,000 for lost revenues -- $150,000 for the three-year construction time frame of the development. we think that number is it too low and recommend it increased by $73,000 to make the porthole in terms of what we estimate the revenue lost to be. we have another policy issue that has been discussed here. the development agreement which is not before the board assumes
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the port would reimburse the developer $5 million for the public improvements in the open space. our recommendation is in fact that the developer pay for those costs and that not be from the ifd. the board has not approved a plan for this ifd. this is consistent with state law which allows and jurisdiction to provide public benefits for the conditional use and the right to develop and proceed with the development process. president chiu: i want to follow up on some of the concerns you've raised. thank you for your analysis. i absolutely agree that the $5 million the port is paying to the developer to provide the so- called community benefit back to the city has never been sent to me.
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colleagues, i think that's something we need to think about whether it's appropriate as part of the steel. your second policy consideration which i want to review on page 22, affect the city will receive limited financial benefits beyond that required by statute pavement, i think that needs to be underscored as budget analysts point out, the majority of these fees are required by statute. there has been a suggestion that somehow this project is very generous to the city and i would just point out that they are by and large doing what they're required to do despite the fact is going to entail the most expensive condos the city has seen. they have been discussions around affordable housing and whether that's enough for -- an appropriate level and i would submit, colleagues, we need to think hard about fact we are being provided the equivalent of 2.3% of the overall project value in affordable housing fees.
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the last thing i want to mention is whether the transfer fee is a transfer tax. if you remember, a number of years ago, we had this discussion at the board about whether or not we should consider transfer fees of this type in prior legislation we considered. one of the main reasons we did not move toward what this so- called transfer fee or transfer tax was legal analysis that suggested if we were to lock down these transfer fees, later down the line, when the property was transferred, it could be quite easy for a new property and owner to sue the city, to essentially get out of the obligation to pay that transfer fee. this idea that the transfer fees are going to accrue to the city, i am concerned about. part of my concern has to do with the partner of this project, the golden gateway. for those of you who may have
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read the san francisco weekly article, the golden gateway is a silent partner in this transaction. they have been able to get away with not paying the city anywhere from $25 million to $30 million of back taxes related to what they suggested were not transactions that occurred, but what any plain reading of the statute would suggest for transactions. essentially, these are financial partners to have been able to escape paying taxes in the past. my concern is even though we have not change the transfer fee to trigger was the second sale, if we are not having a transfer tax or fee applied for sale, we are not able to record that transaction costs. which means later down the line, we may never see the transfer fees or transfer taxes we're talking about here. i just want to thank the budget analyst for raising this issue. it is something that has concerned me and i thought was interesting support staff's only
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example when this has been done before involved the north star result -- north star resort at lake tahoe. it's a question that is still of concern to me and i would love to your other perspectives on this, but i think it's something we have to think about. supervisor chu: to the port, having heard from the budget analyst and your analyst -- and your perspective, the number is -- the numbers of very quite significantly. it's $144 million -- you said it was about $63 million according to the budget analyst. there are a number of reasons why there is a discrepancy and i want to be very careful and walk through them because this does the public a disservice if we say one is right or the other. we need to understand why it is they are different. if we could walk three summary of the public benefits you have laid out in your spreadsheet and let's go through them and make sure we understand why it is the
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port is saying one number and the budget analyst says another. i think president chiu has laid this out but i would like to be on public record. if you could walk us through beginning with the inclusion rehousing fee, you have about $11 million. the budget analyst roughly has the same level, correct? there's no disagreement there. with regard to other city fees and taxes, you have laid out $9 million. the budget analyst only has $1 million. >> i believe they lined out the other impact fees. >> we made our table a little differently than the port dead. -- than the port did. we came up with a similar number in terms of the development impact fees but affordable housing, under the $9 million, the impact fees and
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taxes, we had about $1 million with housing linkage and impact fees under that. there is another $4 million which is not in our report, but we agree should be there. there's another $4 million of permitting fees to the city. permitting fees are associated with city costs and we did not include that number. supervisor chu: the differences, according to your chart, you have $4 million associated with permits and -- >> our numbers are broken out a little differently. we would say about $5 million for other impact fees other than affordable housing. supervisor chu: the area where you differ is on terms of permits that would come to fund the department, but you believe is associated with the work, so you are not counting it?
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payment to the ports and tax increments -- it looks like the increments is just a matter of the time used for your calculation. 45 years as opposed to 30 years. there's not necessarily a disagreement with the numbers as there is the time which are counting. the port is making that assertion over the life of the ifd, which is 45 years and the budget analysis shows 30 years. why did you choose to 30 years? >> that was the initial time provided by the port. 45 years did not match any other estimates we were provided. we had talked about retaining the 30-year time frame and we were concerned when we saw the number because it went back to an earlier discussion which we have agreed on being appropriate. supervisor chu: on the payment to port, it looks like a discrepancy -- can